A defensive business is characterized by which financing trait?

A defensive business is typically characterized by low risk, low returns, and high liquidity. This financing trait reflects a conservative approach to business operations, focusing on safeguarding assets and ensuring that financial resources are readily available to meet immediate obligations.

Defensive businesses often operate in stable industries, providing essential goods or services, and therefore tend to exhibit less volatility in their financial performance. By maintaining a low-risk profile, they prioritize sustainability and resilience over aggressive growth strategies. High liquidity is particularly important in defensive businesses as it allows them to respond quickly to market changes or unforeseen circumstances without facing financial distress.

This focus on low risk and high liquidity plays a significant role in ensuring that a defensive business can withstand economic downturns or shifts in consumer behavior, further reinforcing their preference for stable, predictable returns over the potential for high, yet risky, profit opportunities.